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Huge loophole in campaign finance law

Monday, Oct 31, 2011

* My weekly syndicated newspaper column is about an unknown, but very big campaign finance loophole. I told subscribers about this last week, but as yet nobody else has picked it up. So, here it is

An apparent legislative drafting error has created a massive loophole in the state’s new campaign contribution limit law, and ComEd and its parent company Exelon have been aggressively exploiting it since early this year.

State campaign finance reform laws that capped campaign contributions went into effect this past January 1st. One provision of the new law set a $50,000 cap on what political action committees could receive from other political action committees during a calendar year.

Yet, despite that cap, Exelon’s federal PAC has transferred over $189,000 this year to a state PAC controlled by its subsidiary ComEd. Those transfers appear to be almost four times higher than the law allows.

ComEd has, in turn, taken that Exelon PAC money, pooled it with its own cash and given large numbers of contributions to state legislators as it worked to pass a so-called “Smart Grid” bill, then override Gov. Pat Quinn’s veto of that legislation. The company succeeded at both those tasks last week. Gov. Quinn claimed campaign contributions were behind the company’s legislative success.

So, how did Exelon and ComEd get around the contribution cap law?

Well, ComEd officials insist that what they did was completely within state law. But the Illinois Campaign for Political Reform says otherwise.

“ICPR believes that these transactions are in violation of the Election Code,” said David Morrison, the group’s deputy director. “Only political parties are allowed to make these kinds of transfers, by our reading of the statute.”

ComEd officials claim they cleared these contributions with the Illinois State Board of Elections. The Board’s executive director, Rupert Borgsmiller, said he wasn’t aware of any specific contacts with ComEd, but said the statute in question “hasn’t been fully tested.” He also said the statute has been discussed quite a bit.

“By the plain reading of it, I would say that ComEd has a very good point,” Director Borgsmiller said.

Indeed, the company does have a decent point.

What I’m about to tell you may look technical and complicated, but it’s really not. Stay with me here.

The new campaign caps were outlined in Section 9-8.5 of Illinois law. Paragraph “c” of that section deals with limits on what can be given to state political party committees. Also in that same paragraph is this language: “Nothing in this Section shall limit the amounts that may be transferred between a State political committee and federal political committee.” That language is then followed by more limitations on political parties.

A spokesman for House Speaker Michael Madigan said the intent of the law was to allow state political parties, and only state political parties, to transfer unlimited money from their federal PACs. The law, he said, was absolutely not designed to give companies like ComEd a way to skirt the PAC caps.

But the sentence that ComEd relies on clearly says: “Nothing in this Section.” The “Section” deals with campaign caps of every kind, not just political party caps. If it had said “Nothing in this Paragraph,” then ComEd and Exelon wouldn’t be able to use that sentence to their advantage.

This was a very dangerous mistake by the people who wrote the law. Left unchanged, this loophole could be used to get around all state caps.

Why? Well, under the ComEd/Exelon reading of the law federal PACs do not have to abide by any of the state’s new caps. They can give as much as they want to any candidate, political party, legislative leader, whomever. And, of course, state PACs could form federal PACs to get around all of Illinois’ campaign cap laws.

Neither Exelon nor ComEd have done any of that beyond transferring that money to the ComEd PAC, at least so far, according to an ICPR analysis.

But this is, without a doubt, a truly gigantic loophole that could easily be exploited unless the General Assembly closes it soon.

Director Borgsmiller said his office has been contacted numerous times about the cap rules. A Board of Elections’ task force recently recommended that the loophole be closed during the spring session. It ought to come even sooner.

Madigan’s spokesman said last week no decision had been made about whether to proceed with legislation. He suggested that the Board ought to just enforce the law the way it was intended. But the Board is so far interpreting the laws the way they are written.

Discuss.

* Related…

* Jones says Legislature, not governor, looked out for consumers on ’smart grid’

* Lawmakers deny contributions affected their ’smart grid’ votes: State Rep. Wayne Rosenthal, R-Morrisonville, and state Sen. Sam McCann, R-Carlinville, each in their first legislative terms, received $2,000 apiece from the utility during their 2010 campaigns. McCann and Rosenthal voted against overriding the governor. McCann voted against the follow-up legislation, while Rosenthal voted for it.

* Editorial: Illinois utilities use ’smart grid’ to bypass regulators

- Posted by Rich Miller        

15 Comments
  1. - just sayin' - Monday, Oct 31, 11 @ 8:17 am:

    Thanks for getting this out Rich.

    It’s a huge disgusting scandal.

    In the old days those company executives and their lawmaker stooges who did their bidding would be put in stocks in the town square and we would at least get to throw some rotten produce at their greedy faces.

    Would no doubt need super-sized stocks these days given the bloated nature of most of those worthless tubs of goo.


  2. - wordslinger - Monday, Oct 31, 11 @ 8:22 am:

    I hate when I make a drafting error and it results in more money in my pocket.

    Kudos to the good-government watchdogs at Exelon for taking advantage of an opportunity to participate more fully in Illinois democracy.

    –Madigan’s spokesman said last week no decision had been made about whether to proceed with legislation. He suggested that the Board ought to just enforce the law the way it was intended. But the Board is so far interpreting the laws the way they are written. –

    Considering ComEd’s legislation passed the House without any discussion last week, perhaps a cleanup bill on this could have gone through pretty easily, too, if it was a priority?


  3. - Cindy Lou - Monday, Oct 31, 11 @ 8:26 am:

    The bills need to be writen/worded as if meant for a rebellious teenager. Good intentions are all fine and dandy and all that…but when one is trying to rope in the rebellious kid one needs to write/speak in very specific non-debatable carefully chosen mannerisms. If the ‘kid’ can find the loophole and possibly deliberately misinterpret what one actually said/meant they will. In a heartbeat.


  4. - Anonymous - Monday, Oct 31, 11 @ 8:37 am:

    I hate to make this a theme, but given last week’s clean sweep for corporate interests in Springfield:

    Thank you sir, may I have another?


  5. - Dirt Digger - Monday, Oct 31, 11 @ 8:43 am:

    It might be a loophole but it’s not THAT big a deal. It’s not like there aren’t limits on federal campaign finances.


  6. - Rich Miller - Monday, Oct 31, 11 @ 9:16 am:

    There are limits on federal contributions, but now there are no limits whatsoever from federal PACs to state PACs. That, to me, is a pretty darned big loophole.


  7. - Anonymous - Monday, Oct 31, 11 @ 9:22 am:

    Given the speaker’s reputation for paying close attention to proposed legislation, it is hard to imagine this is a drafting error, especially since it involves campaign financing.


  8. - Rich Miller - Monday, Oct 31, 11 @ 9:25 am:

    Anon, the Speaker capped PACs to prevent anyone else from controlling the game except for him. Ergo, for this reason, talking to people who wrote the bill and the anger they expressed when I first disclosed this story, I believe this was an accident.


  9. - just sayin' - Monday, Oct 31, 11 @ 9:39 am:

    They’re far too busy raking in loot from ComEd and others to read carefully.


  10. - titan - Monday, Oct 31, 11 @ 9:45 am:

    Legislative drafting quality is rather spotty, varying from clear, tight and well-drafted to incomprehensible, vague and ill-fitting with regard to the existing law.
    I think the quality has slipped over the last couple decades


  11. - Yellow Dog Democrat - Monday, Oct 31, 11 @ 9:54 am:

    I’ve said it before and I’ll say it again: the only way to end the undo influence of special interest money on public policy-making is public financing.

    Incrementalism delays true reform and tilts the playing field even further toward the most powerful interests, because they can afford the best lawyers.


  12. - walkinfool - Monday, Oct 31, 11 @ 10:35 am:

    Rich — now THIS is how a good reporter actually helps our democracy. Thanks.


  13. - soccermom - Monday, Oct 31, 11 @ 11:37 am:

    Yeah, Word — If this was a mistake, let’s see ‘em fix it, before any more “mistaken” money winds up in their campaign chests.


  14. - Anonymous - Monday, Oct 31, 11 @ 2:06 pm:

    Madigan’s spokesperson speaks irony about the intention and the letter of the law. Was it the intention of the cutback amendment that we should have a speaker-for-life? I would say that such was not the intention, but the allows it. It apparently depends how beneficial the intention is to you.

    By the way, why is this loophole described ad massive, huge, and very big? Serious question.


  15. - Anonymous - Monday, Oct 31, 11 @ 2:18 pm:

    …but the law allows it. Sorry.


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